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The Panic of 2020: Is Buying In Bulk Sustainable?

Person washing their hands in a sink.
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With consumers purchasing products in mass quantity for future preparations, it can be stressful to know what that might bring for the economy. Host of Full Disclosure, Roben Farzad chats with financial advisors Dalal Salomon and John Harper of Salomon & Ludwin —financial advisory founded during the Great Recession — on their approach to the unprecedented dual health-and-financial crisis of the coronavirus pandemic.

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Episode Excerpt

The following excerpt was edited for clarity. [8:10]

John Harper: There's so much uncertainty out there. And I think that's the part, we don't know when this ends. And as we peak, the fear side of it is going to get to the place where we're going to see probably more pain. But I think that's what we need, that final cleansing that's going to get us back to where we have some answers. Right now, we don't really trust our faith in what the Fed is doing is working. We don't have faith necessarily in what's going on for this virus and how we're going to handle that from a health perspective. So it does leave us with a lot of unknowns and we need to have some clarity before we can actually take those steps forward. At the most, at the current point we are so filled with fear that it's hard to actually step up to the plate and bite the bullet.

Roben Farzad: Well let me put on the Peter Lynch hat for a minute. Do you remember the old ads from Fidelity? What was it in the early 90s? ‘Buy what you know! If you see like something out there! Coca Cola, my kids drink Coca Cola.' And that's not always been a great thing. You might love Chipotle, it might be valued at 300 times earnings and have an E coli or salmonella scare in front of it. But I'll tell you what I was out and about today on West Broad Street. Costco was like Mad Max Beyond Thunderdome. I went to Wegmans which is not publicly traded. But you could see Kroger which is also a mob. Every bottle, every last bottle of Purell, every Clorox product, every bit of water, toilet paper, I mean, think about Kimberly Clark. Then I go into CVS and everybody's lining up to talk to the pharmacy … We know of course when everything is failing, you have to sell even the things that aren’t going to nominally be safe

Dalal Salomon: Remember, a lot of people are in index funds now. So when they're selling, they're selling everything.

Farzad: But is that not a tell of irrationality? You tell me that Clorox, yes it's nominally. I don't know how cyclical it is but it's kind of a consumer staple. But everybody is obsessing and fixating over Clorox this week or CVS. And these are companies that pay dividend yield. So when people completely lose sight of any modicum of rationality in the market or cause and effect, maybe that's an indication of capitulation.

Harper: Right. I think we're trying to find what is the real value? I think we're repricing risk so quickly right now, I think it's the panic selling that is getting taken over. But it is at some point, you have to step up. And I think there's great value out there. I mean, whether it's those staples, you know, it's the utilities in your backyard, they're still going to keep on producing power and electricity for those consumers. And there's some things that don't change, but we have to find that.

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